Beyond location: Four game-changing factors for industrial leasing
Offset rising industrial real estate rents with your supply chain
Transportation alone cost US businesses over $1.85 trillion in 2021, according to the 2022 Annual State of Logistics report. To put that number into perspective, that's 8% of 2021's $23 trillion GDP.
So when it comes to industrial site selection, it's easy to see why identifying the right facility location is the number one rule in real estate. But don’t overlook the rest of the equation—transportation, labor and logistics—because in this case, the whole is greater than the sum of its parts.
Location is just one of many things you need to consider when site shopping. Here are four other key areas that can help you balance supply chain expenses and facilities costs.
A business doesn’t run itself; people drive a company to success. And locating your facility in an area with access to a pool of quality labor is vital. Seven out of ten industrial companies experienced delayed production due to unfilled positions and saw labor shortages as a critical challenge to growth, according to a recent McKinsey report. And to top it off, labor costs have also increased over the last five years. Freightwaves notes that over the last two years, parcel rates rose 14.7%, while rates for truckload and specialized transportation increased by a whopping 25%.
2. Sustainable operations
Despite the financial pressures of rising rents and labor costs, sustainability is still a top priority for industrial occupiers, with many companies factoring environmental upgrades into their real estate strategies. Although incorporating green initiatives can be expensive, there are ways to take a smart approach to sustainability that can actually reduce your overall operating costs.
Locating your warehouse near a major city or port might have higher rent prices, but this will ultimately reduce transportation costs from the time your shipment comes off the boat, train, truck, etc., to the first-mile delivery point. You’ll save money on fuel and vehicle maintenance and get the goods more quickly to consumers. On the inbound side, you’re probably working with a minimal number of suppliers that provide most of your shipment volume. Plus, the best way to reduce drayage costs associated with first-mile shipping is to move closer to major ports, which helps cut your o total transportation costs.
Automated technology is an investment that could pay dividends for your supply chain and every part of your business. Whether your warehouse is a Class A, B or even C, you should consider the structural components of your facility, like the power and clear height. Among your warehouse employees, order pickers will spend the most time traveling. Pickers spend about 75% to 80% of their day walking, riding pallet jacks, using forklifts, climbing stairs and doing other physical labor. Technology can help with complex tasks and projects while increasing workforce productivity by 20%-25%.
Learn how to balance supply chain costs
Want to know what it takes to prepare for supply chain disruptions and maintain resilience throughout your network? Explore this interactive experience and find out why location is so important when it comes to balancing supply chain expenses with real estate. Now more than ever, you need a thorough supply chain analysis to guarantee your network runs smoothly.
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